Any business with employees must withhold money from its employees’ paychecks for income and employment taxes, including Social Security and Medicare taxes (known as Federal Insurance Contributions Act taxes, or FICA), and forward that money to the government. A business that knowingly or unknowingly fails to remit these withheld taxes in a timely manner will find itself in trouble with the IRS.
The IRS may levy a penalty, known as the trust fund recovery penalty, on individuals classified as “responsible persons.” The penalty is equal to 100% of the unpaid federal income and FICA taxes withheld from employees’ pay.
Who’s a Responsible Person?
Any person who is responsible for collecting, accounting for, and paying over withheld taxes and who willfully fails to remit those taxes to the IRS is a responsible person who can be liable for the trust fund recovery penalty. A company’s officers and employees in charge of accounting functions could fall into this category. However, the IRS will take the facts and circumstances of each individual case into consideration.
The IRS states that a responsible person may be:
- An officer or an employee of a corporation
- A member or employee of a partnership
- A corporate director or shareholder
- Another person with authority and control over funds to direct their disbursement
- Another corporation or third-party payer
- Payroll service providers
The IRS will target any person who has significant influence over whether certain bills or creditors should be paid or is responsible for day-to-day financial management.
Working With the IRS
If your responsibilities make you a “responsible person,” then you must make certain that all payroll taxes are being correctly withheld and remitted in a timely manner. Talk to a tax advisor if you need to know more about the requirements.
…from the Team of Professional at RE-MMAP We are just a click or call away. www.re-mmap.com and phone # (561-623-0241).
It isn’t easy deciding whether a worker should be treated as an employee or an independent contractor. But the IRS auditors will look at the distinction closely.
For an employee, a business generally must withhold income and FICA (Social Security and Medicare) taxes from the employee’s pay and remit those taxes to the government. Additionally, the employer must pay FICA taxes for the employee (currently 7.65% of earnings up to $137,700).*
The business must also pay unemployment taxes for the worker. In contrast, for an independent contractor, a business is not required to withhold income or FICA taxes. The contractor is fully liable for his or her own self-employment taxes, and FICA and federal unemployment taxes do not apply.
Employees Versus Independent Contractors
To determine whether a worker is an independent contractor or employee, the IRS examines factors in three categories:
- Behavioral control — the extent to which the business controls how the work is done, whether through instructions, training, or otherwise.
- Financial control — the extent to which the worker has the ability to control the economic aspects of the job. Factors considered include the worker’s investment and whether he or she may realize a profit or loss.
- Type of relationship — whether the worker’s services are essential to the business, the expected length of the relationship, and whether the business provides the worker with employee-type benefits, such as insurance, vacation pay, or sick pay, etc.
In certain cases where a taxpayer has a reasonable basis for treating an individual as a non-employee (such as a prior IRS ruling), non-employee treatment may be allowed regardless of the three-prong test.
If the proper classification is unclear, the business or the worker may obtain an official IRS determination by filing Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding.
Generally, if a business has made payments of $600 or more to an independent contractor, it must file an information return (Form 1099-MISC) with the IRS and send a corresponding statement to the independent contractor.
Consequences of Misclassification
Where the employer misclassifies the employee as an independent contractor, the IRS may impose penalties for failure to deduct and withhold the employee’s income and/or FICA taxes. Penalties may be doubled if the employer also failed to file a Form 1099-MISC, though the lower penalty will apply if the failure was due to reasonable cause and not willful neglect.
Employers with misclassified workers may be able to correct their mistakes through the IRS’s Voluntary Classification Settlement Program (VCSP). For employers that meet the program’s eligibility requirements, the VCSP provides the following benefits:
- Workers improperly classified as independent contractors are treated as employees going forward.
- The employer pays 10% of the most recent tax year’s employment tax liability for the identified workers, determined under reduced rates (but no interest or penalties).
- The government agrees not to raise the issue of the workers’ classification for prior years in an employment-tax audit.
Your tax advisor can help you sort through the IRS rules and fulfill your tax reporting obligations. *Internal Revenue Service. For 2020, the Social Security tax rate is 6.2% and is applied to earnings up to $137,700. The Medicare tax rate is 1.45% on the first $200,000 and 2.35% above $200,000.
…from the Team of Professional at RE-MMAP We are just a click or call away. www.re-mmap.com and phone # (561-623-0241).
The Setting Every Community Up for Retirement Enhancement Act of 2019 (the SECURE Act) was signed into law on December 20, 2019. The Act will likely impact large numbers of working Americans as well as those already retired. In general, the Act is intended to increase access to tax-advantaged retirement plans and to help prevent older Americans from outliving their assets.
Here are some of the changes that could affect your planning.
Delayed Deadline for Taking Required Minimum Distributions
Tax law has generally required individual retirement account (IRA) owners and retirement plan participants to begin taking required minimum distributions (RMDs) from their accounts once they reach age 70½. The new law pushes back the age at which these distributions must begin to age 72 for IRA owners and plan participants born on or after July 1, 1949. This change allows individuals to take advantage of their retirement account’s tax-deferred nature for a longer period.
No Age Limit for Making Traditional IRA Contributions
Beginning with the 2020 tax year, the new law eliminates the 70½ age limit for making annual contributions to traditional IRAs. This is a plus for those people who continue to work past age 70½ and want to keep saving for retirement on a tax-deferred basis.
Penalty-Free Birth and Adoption Distributions
The new law also expands the exceptions to the 10% penalty for early withdrawals from IRAs and other tax-deferred retirement plans by adding an exception for “qualified birth or adoption distributions” up to $5,000. The new law defines a “qualified” birth or adoption distribution as a withdrawal from an IRA or other eligible retirement plan made during the one-year period beginning on the date the IRA owner’s or the plan participant’s child is born or the adoptee’s adoption is finalized. If desired, parents may replenish their retirement savings by repaying the amount distributed.
Restrictions on Stretch IRAs
The new law places severe restrictions on the use of “stretch” IRAs. A stretch IRA generally permitted beneficiaries to take their RMDs from an inherited IRA over their life expectancy. Thus, beneficiaries were able to stretch payments from the inherited IRA over many years and potentially pass on the inherited IRA to their own beneficiaries. The SECURE Act changes the RMD rules for beneficiaries of IRA owners (and plan participants) who passed away in 2020 or later. Under the SECURE Act, the use of stretch IRAs is restricted to a limited group of IRA beneficiaries. The specific details on who is eligible to use stretch IRAs is complex, and IRA owners who base their estate plans on the use of a stretch IRA should consult with a financial professional to see how they might be impacted.
Small Business Retirement Plans
Good news if you own a small business — the SECURE Act provides incentives to make it easier for you to establish a retirement plan. Starting in 2020, eligible employers that establish a 401(k) or SIMPLE IRA plan with automatic enrollment may qualify for a new tax credit of $500 per year for up to three years. In addition, the existing credit for small employer plan startup costs has increased to as much as $5,000 per year for three years. Previously, the annual credit maximum was $500. Employers also have more time to establish a qualified retirement plan. Previously, a qualified plan, such as a profit-sharing plan, had to be adopted by the last day of the employer’s tax year to be effective for that year. The SECURE Act allows a qualified plan to be adopted as late as the employer’s tax filing deadline (plus extensions).
Your financial and tax professionals can provide more details about these and other important SECURE Act changes and how they may affect your retirement planning.
…from the Team of Professional at RE-MMAP We are just a click or call away. www.re-mmap.com and phone # (561-623-0241).
Keep a constant watch on your accounts receivable to improve cash flow.
Quick: How many of your invoices are unpaid? Have any of your customers gone over 30 days past due? Did you bill all of the time and expenses for that project you just completed for a customer?
If you’re doing your accounting manually, there’s simply no way to get that information quickly. Depending on your bookkeeping system, you may not be able to get it at all.
QuickBooks Online has more than one solution to this problem. You see the first one every time you log in. The Dashboard contains a graphic in the upper left corner that tells you how many invoices are overdue and unpaid. Click on the colored bar labeled OVERDUE, and you’ll see a list of invoices with the unpaid ones right at the top. When looking for QuickBooks or Xero Accountants, it’s always good to choose platinum partners like The Numbersmith.
You can tell at a glance how much of your money is tied up in unpaid invoices.
While this is important information for you to have as you start your workday, it doesn’t tell the whole story. To get that, you’ll need to access some of QuickBooks Online’s reports – five of them in particular. Click Reports in the left vertical pane, and then scroll down to the heading labeled Who owes you.
These reports are listed in two columns. Each has the outline of a star next to it. Click on the star, and the report will be added to the Favorites list at the top of the page. Click on the three vertical dots next to it, and you’ll be able to Customize the report. And as you hover over the title, you’ll see a small, circled question mark. Click on this to get a brief description of the report.
There are several reports on this list that can provide insight into where your outstanding revenue is. We recommend you run five of them at least once a week – more frequently if your business sells large quantities of products and/or services. The suggested are:
Accounts receivable aging detail
This report provides a list of invoices that are overdue, along with aging information. There are several columns in the report, but you’ll want to pay special attention to the last one: OPEN BALANCE.
Tip: If you have many customers or simply a high volume of unpaid invoices, you might consider running the Accounts receivable aging summary instead.
Changing the Content
Before you run the report, you should explore the customization tools provided for it. They won’t be the same for every report, but you can start to get an idea of what can be done. Hover over the report title and click Customize. A panel like the one pictured below will slide out of the right side of the screen.
QuickBooks Online provides deep customization tools for reports.
You can see some of your customization options in the image above. Beyond these, you can also work with filters and headers/footers. When you’re satisfied with your changes, click Run report.
If you want to run a report with its default settings, just click on the report title in the list to display it. You’ll have access to limited customization from there.
Four other reports you should be generating regularly are:
- Customer Balance Summary: Shows you how much each customer owes your business
- Open Invoices: Lists invoices for which there has been no payment
- Unbilled Charges: Just what it sounds like: tells you who hasn’t been invoiced yet for billable charges
- Unbilled Time: Lists all billable time not yet invoiced
We don’t expect you’ll have any trouble understanding reports like these; they’re fairly self-explanatory. QuickBooks Online offers many other reports, the standard financial reports that need to be generated monthly or quarterly, like Balance Sheet, Profit and Loss, and Statement of Cash Flows. You’ll absolutely need these should you apply for a loan or need to supply in-depth financials for any other reason. We can help you analyze them to get a comprehensive, detailed picture of your company’s fiscal health.
Has your bank, broker, credit card company, or maybe even your phone or utility company sent you information about getting your statements online instead of through the mail? Going paperless has its advantages — not the least of which may be seeing your countertop for the first time in months. But it also has its drawbacks. Before you completely eliminate paper statements, look at both the pros and cons.
When customers manage their accounts online, companies can save substantial amounts of money in printing and mailing costs. That’s why many companies offer incentives, such as reducing interest rates or fees or making donations to environmental groups, to encourage customers to go paperless. And fewer mailings mean there’s less risk that someone could steal personal documents from your mailbox and use the information fraudulently.
While companies claim financial information sent electronically is more secure, not everyone agrees. When they happen, security breaches can put your personal information at risk. And it may be easier to miss the e-mail or forget about reviewing statements or paying bills when you don’t have them right in front of you.
Another potential drawback: Retrieving statements that are more than a few months old may be difficult, although many companies say they’re working on archiving several years’ worth of documents.
Going paperless may be to your advantage, but weigh everything carefully before you sign up.
Take charge of your financial future. Give us a call, today, to find out how we can assist you and your business.
Is it time to put your expansion plan on the front burner? Have you outgrown your current location? Do you need to replace some equipment? There are many reasons small business owners might be in the market for a loan. If you’ll be shopping soon, here are some pointers from www.GTRwallet.com.
Check your credit. When you apply for a loan, the lender will look at your personal and your business credit histories. Before you start the application process, check to make sure both are accurate and up to date. If there are errors, resolve them ahead of time.
Why Does a Poor Credit Score Limit my Borrowing Options? A credit score is a numerical representation of your creditworthiness. It is what most lenders look at (among other things) to determine how likely you are to repay a potential loan on time. It’s in lenders’ best interest to lend money only to borrowers who can pay the loan back on time, which is why you may find it a bit harder to acquire a loan from some traditional lenders if your credit rating has received a recent drop.
Polish your plan. Prospective lenders will want to know as much as possible about your business. Prepare a comprehensive, up-to-date business plan that provides information about your company (a description and an executive summary) and yourself (educational background and relevant experience). Since your plan may be pivotal in convincing potential lenders to approve your loan, consider including an overview of your management team and key personnel along with some market analysis and a marketing plan. Take this opportunity to learn more about the lending process. Find information that will help you with the purchase of your new home in Kansas City. Fill out our no-obligation application to see what interest rate you qualify for and obtain a pre-approval letter. Below and throughout this site, you will find information that will help you with the purchase of your new house or refinancing an existing home. You will get know your home loan options, do visit. If you are looking for a home lender in Kansas City that answers their phone, give us a call. From the real estate agent, Title company, Financial Adviser, Insurance agents and Underwriters, all with the highest and best level of customer service, we have you covered.We are the recipients of the 2020 Five Star Award. This represents fewer than 3 percent of Loan Officers. Our production levels, our partnerships, and our client satisfaction ratings say it all. Let us help you make your Kansas City dreams a reality, visit our local office today.
You should also be prepared to provide financial statements and cash flow projections with good knowledge of your banking account status. Lenders may request personal financial statements for you and other owners as well.
Check your equity. Before you submit a loan application, make sure you have enough equity in the business. Although requirements can vary, lenders generally want a company’s total liabilities to be less than four times equity. A lender may require you to put some additional money into your business before approving you for a loan.
Identify collateral. Lenders generally require collateral, an alternate repayment source that can be used in case your business isn’t generating enough cash to make payments on your loan. Either business or personal assets can be used. If you don’t have anything you can use as collateral, perhaps you can find someone who does who will cosign the loan.
Look for a good match. If you already have a good working relationship with a bank that lends to small businesses, it makes sense to start there. If you don’t, or if your bank isn’t a good match, do your homework. Look for lenders that do business with companies similar in size to your own. Finding a lender that’s familiar with your industry is an added bonus.
Much like a map or a GPS provides clear directions to your destination, a business plan can help define your goals and spell out the steps your business must take to achieve them. It can also establish a set of benchmarks to measure your progress. A business plan is critically important when it comes to obtaining financing. Here are the key sections that a business plan should include provided by https://www.boostcredit101.com/
Your executive summary outlines the primary points in the subsequent sections and touches on your company profile and goals.
Company Goals/Mission Statement
This section summarizes your company’s purposes and goals. It defines who you are and what you want to achieve.
Here you can demonstrate your industry knowledge and present conclusions based on your assessment of the industry, your potential market and its demographics, and your main competitors.
Provide information on what you do, how you do it, the markets your business serves, and what differentiates your business from the competition. You can include examples of recent projects that were completed and, if advisable, the names of some of your major clients.
Organization and Management
Here you can outline your business’s organizational structure and identify the company owners, management team, and board of directors.
Service or Product Line
This section provides the opportunity to explain what you sell and how your products or services benefit customers.
Strategy and Implementation
It’s important to summarize how you plan to market your business and what your sales strategy is. This section should include information on how you will reach target customers and penetrate the market and should provide details about pricing, promotions, and distribution.
This is where you present an overview of your finances. It is where you lay out your assumptions about revenue growth, operating costs, and cash flows with help of some financial business advisory. Include balance sheets, income statements, and cash flow schedules as well as details about capital requirements.
QuickBooks Online has worked well for countless businesses as is. But if you need more than it offers in some areas, there’s likely to be an app for that.
You’d be hard-pressed to find two small businesses in the U.S. that have exactly the same needs when it comes to financial management. Fortunately, QuickBooks Online is powerful and flexible enough to please hundreds of thousands of small businesses.
As companies grow, they often find that the core features, user interface, and navigational tools that QuickBooks Online offers still suit them just fine. Still, they need to move beyond the tools offered in one or more areas.
That’s why QuickBooks Online has dozens of add-on applications – apps – that focus on one specific area of QuickBooks Online and extend what’s offered there. Since they’re all cloud-based, you have access to them anywhere, anytime, on a PC or mobile device, once you’ve set up an account.
To see what’s available, just click on the Apps link in the left vertical toolbar.
Figure 1: You can choose from dozens of integrated applications built specifically to add features and flexibility to individual areas of QuickBooks Online.
Take a look around this page, and click on any of them to get more information. All of the apps listed were designed to fit QuickBooks Online, but if you’re new to integrated applications or wondering whether a specific one would be a good match for your business, we can help you decide – and get started with it.
QuickBooks Online’s apps cover a lot of ground. Each falls into one of several categories, including billing and collections, expense management, time tracking, and customer relationship management. We’ll look at three of them here.
Bill.com automates your accounts payable and receivable. It began its life as a billing app (hence the name), adding receivables a few years ago. Though you could use it as a sole proprietor, its features are more fully utilized in a team setting. You email, fax, or upload incoming bills to your Bill.com account, where they can be entered, routed to the appropriate staff person, approved, and processed (transmitted directly to a vendor bank account or remitted via paper check). The ability to store all related documents in the cloud and maintain a strict audit trail add to the site’s security. Automated invoices, reminders, and payments simplify your receivables workflow. Bill.com also provides a close, real-time look at your current cash flow and also projects future scenarios.
Concur Travel and Expense has very tight integration with QuickBooks Online; it shares, for example, customer, vendor, and employee records, as well as job data and expense types. Your employees can either enter expense data manually or use a smartphone to take pictures of receipts, which can then be uploaded directly into Concur and automatically attached to their expense reports, along with any credit card charges (which can also be sent directly). Once you’ve approved an expense report, Concur handles the background bookkeeping and transfers funds into your employees’ bank accounts.
Figure 2: Your mobile employees can create and submit expense reports on the road using the mobile Concur app. iPhone, iPad, Android, and Blackberry are also supported.
Method CRM marries your QuickBooks Online data to your customer relationship management tasks. Lists of your customers, vendors, items, etc. and their associated records are available in the app, as are transactions like invoices, payments, and vendor bills. When prospects fill out forms on your website asking for product and/or service information, a new lead/sales opportunity is created in Method CRM. If a lead becomes a customer, that data is shared with QuickBooks. The app is exceptionally customizable, down to the actual design (should you decide to tackle this, though, let us work with you from the start).
There are many other types of apps that can be integrated with QuickBooks Online, including:
– Constant Contact: Email marketing
– TSheets Time Tracking: Timesheets and time tracking
– Bigcommerce: Online shopping cart management
– F|G Receivables Manager: Smart accounts receivable management
– Shoeboxed: Scans and categorizes paper receipts
Figure 3: You can upload or drag and drop files, forward emails, or send paper receipts through U.S. Mail in a prepaid envelope to Shoeboxed.
These apps are easy to use for the most part, but whenever you’re moving data in and out of QuickBooks Online, you need to have a clear understanding of the source and destination. We’ll be happy to assist as you move beyond the boundaries of QuickBooks Online.
When it comes to employee benefits, paid vacation time is a favorite. Although not legally required in the U.S. (as it is in most other developed countries), most employers — about 77% of businesses in the private sector — provide their employees with paid vacation time.1
What’s in It for You?
But what is the business impact of letting your employees go on vacation? Isn’t it bad, especially for small businesses, when key employees are gone for a week or longer? Actually, it isn’t. While it may be disruptive in the short term, providing paid vacation time can benefit employers. A survey of human resources professionals, a large majority ranked taking vacation as very or extremely important for employee performance (94%), morale (92%), wellness (92%), productivity (90%), a positive culture (90%), and employee retention (88%).2
Vacations may be a win-win, but you still need to minimize disruption and maintain productivity when employees are away. Here are a few tips:
- If you don’t already have one, formalize a vacation policy that spells out how to request vacation time, how many employees may be gone at the same time, how disputes will be handled, etc.
- Create a master calendar and record all approved time off.
- Cross-train employees; try to have at least two people trained to cover each job.
- Have employees update their job descriptions and provide access to any passwords or other information that may be needed during their absence.
- Prior to leaving, make sure employees compose “away” messages for voicemail and e-mail and let key customers and contacts know how long they will be gone.
Benefits Are the Bottom Line
A comprehensive, competitive benefits package is the best way to attract and retain employees. Top prospects want health insurance, voluntary benefits, and a retirement plan in addition to vacation time. How do your benefits stack up? Your financial professional knows the marketplace and can provide guidance to help you make your benefits package more competitive.
If you have a seasonal business, you most likely face some challenges that year-round businesses don’t. After all, trying to squeeze a year’s worth of business into a far shorter period can get pretty hectic. Here are some tips that may help. For easier money management make sure you look into business spending management solutions.
All small business owners have to be careful cash managers. Strict wealth management is particularly critical when cash flows in over a relatively short period of time. One very important lesson to learn: Control the temptation to overspend when cash is plentiful.
Arming yourself with a realistic budget and sound financial projections, including next season’s start-up costs, can help you maintain control. And you may want to establish a line of credit just in case.
In the Off-Season
It’s difficult to maintain visibility when you aren’t in business year round. But there’s no reason why you can’t send your customers periodic updates via e-mail or snail mail. You’ll certainly want to announce your reopening date well ahead of time. You can also spend time developing new leads and lining up new business.
Time for R and R
You deserve it, so take some time for rest and relaxation. But you’ll also want to use the time your business is closed to make any necessary repairs and take care of any sprucing up you’d like to do. You can also use the off-season to shop around and look for deals on items you keep in stock and/or equipment you need to buy or replace.
If you’re thinking of making the transition from “closed for the season” to “open all year,” start investigating new product lines or services. If you diversify in ways that are complementary to and compatible with your core business, your current customer base may provide support right away. A well-thought-out expansion can be the key to a successful transition into a year-round business.
…from the Team of Professional at RE-MMAP We are just a click or call away. www.re-mmap.com and phone # (561-623-0241).v